Potential Circuit Split May Prime Supreme Court Review of Key Privacy Law

Companies whose businesses involve the collection or use of consumers’ personal information should keep an eye on the Seventh Circuit, which may be poised to trigger Supreme Court review of a key Ninth Circuit decision favoring privacy advocates.

In 2010, the Ninth Circuit held in Edwards v. First Am. Corp. that a plaintiff, who could show no “actual injury,” nonetheless had standing under Article III of the US Constitution to challenge a purported violation of RESPA’s anti-kickback provision. The plaintiff was a home purchaser who alleged that the defendant title insurance company violated RESPA by paying millions of dollars to individual title companies to induce exclusive referrals. The title insurance company and its parent moved to dismiss on grounds that state law established the price of plaintiff’s title insurance and that plaintiff could not have suffered an overcharge and could establish no injury-in-fact. The District Court denied the motion, holding that the plaintiff had alleged a sufficient injury simply by claiming a violation of her rights under RESPA; the Ninth Circuit affirmed. The Supreme Court’s June 2012 dismissal of the Edwards appeal preserved that case as good law going forward, at least in the Ninth Circuit.

Since then, several courts have relied on Edwards to hold that a plaintiff who has alleged a violation of a statute providing a private right of action has sufficiently established an injury-in-fact for purposes of Article III standing, including cases involving defendants whose businesses collect or use consumers’ personal information.

A recent decision in the Northern District of Illinois, however, may have set up a circuit split that would pave the way for potential Supreme Court review of Edwards. In Sterk v. Best Buy Stores, the Court held that retention of customers’ personal information for longer than necessary for the purpose it was collected in violation of the Video Privacy Protection Act (“VPPA”) did not constitute an injury-in-fact sufficient to establish Article III standing. Best Buy relied principally on Sterk v. Redbox Automated Retail, Inc., a Seventh Circuit decision by Circuit Judge Richard Posner, holding that retention, but not disclosure, of consumers’ personal information in violation of the VPPA causes no damages nor justifies an award of statutory damages under the VPPA. Best Buy, if upheld at the Seventh Circuit, would potentially create a circuit split with Edwards on the broad issue of a plaintiff’s burden in establishing Article III standing where the plaintiff alleges violation of a statute with a private right of action. Such a split could potentially reengage US Supreme Court review of this important issue. While Best Buy provides a much-needed counterpart to Edwards, this issue calls out for a Supreme Court statement reestablishing the appropriate, more substantial burden for a plaintiff in these kinds of cases.

Arent Fox is continuing to monitor this case and other issues related to privacy law. Please contact the listed attorneys with questions.